The New Arthurian Economics

Friday, March 17, 2017

As David Leonhardt explained in a great New York Times column in 2008, this all started in the U.S. with Carroll D. Wright, who as head of the Massachusetts Bureau of the Statistics of Labor during the economic hard times of the 1870s set out to measure joblessness while excluding people he considered malingerers:

The survey asked town assessors to estimate the number of local people out of work. Wright, however, added a crucial qualification. He wanted the assessors to count only adult men who “really want employment,” according to the historian Alexander Keyssar. By doing this, Wright said he understood that he was excluding a large number of men who would have liked to work if they could have found a job that paid as much as they had been earning before.

If, indeed, it were true that the existing real wage is a minimum below which more labour than is now employed will not be forthcoming in any circumstances, involuntary unemployment, apart from frictional unemployment, would be non-existent. But to suppose that this is invariably the case would be absurd.

... if they could find a job that paid less, they would take it. They wouldn't prefer it, but if nothing else was available...

2 comments:

I think they were unemployed because of sticky wages, and that if workers collectively accepted lower wages then we would have had full employment in 1936."

"Moreover, the contention that the unemployment which characterises a depression is due to a refusal by labour to accept a reduction of money-wages is not clearly supported by the facts. It is not very plausible to assert that unemployment in the United States in 1932 was due either to labour obstinately refusing to accept a reduction of money-wages or to its obstinately demanding a real wage beyond what the productivity of the economic machine was capable of furnishing. Wide variations are experienced in the volume of employment without any apparent change either in the minimum real demands of labour or in its productivity. Labour is not more truculent in the depression than in the boom — far from it. Nor is its physical productivity less. These facts from experience are a prima facie ground for questioning the adequacy of the classical analysis."

Sumner announces "I think so-and-so" and he expects us to adopt his view just because he said it. Sumner does economics by proclamation.

One of my favorite lines from Keynes is "Labour is not more truculent in the depression than in the boom"... but I have so many favorite lines from Keynes!

One of my LEAST favorite posts from Sumner is the musical chairs one that my Sumner quote came from. Sumner cannot even keep straight whose definition he is using:"But what is so obvious about involuntary unemployment, as defined by Keynes? We all agree that there were lots of people without jobs. We all agree that lots of them wanted to be working. We all agree that lots of them were miserable. I call that 'involuntary unemployment.'"(Sumner's italics)